Medtronic to Pay United States $40 Million to Settle Kickback Allegations

WASHINGTON – Medtronic Inc. has agreed to pay the United States $40 million to
settle civil allegations that its Medtronic Sofamor Danek division (MSD) paid
kickbacks to doctors to induce them to use MSD’s spinal products, the Justice
Department announced today. The government had alleged that, between 1998 and
2003, Medtronic paid kickbacks in a number of forms, including sham consulting
agreements, sham royalty agreements and lavish trips to desirable locations.
The Justice Department contended that these kickbacks violated the
Anti-Kickback Statute and the False Claims Act.

“Kickbacks to physicians are incompatible with a properly functioning health
care system,” said Peter Keisler, Assistant Attorney General for the
Department’s Civil Division. “They corrupt physicians’ medical judgment and
they cause overutilization and misallocation of vital health care resources.
Today’s settlement reflects the progress we are making in the ongoing fight
against abusive and illegal practices in the healthcare industry.”

The government’s investigation was triggered by the filing of a qui tam action.
Under the False Claims Act, private parties may file whistleblower suits on
behalf of the United States and collect a share of any recovery.

"The settlement announced today demonstrates that schemes involving submissions
of false or fraudulent claims by health care companies and health care providers
to federal health care programs will be vigorously and energetically pursued,”
said David Kustoff, the United States Attorney for the Western District of
Tennessee. “This agreement should serve as a deterrent to those entities that
attempt to defraud or deceive the taxpayers."

This case was handled by the Justice Department’s Civil Division, the United
States Attorneys’ Office in Memphis, the Federal Bureau of Investigation, the
Office of Inspector General of the Department of Health and Human Services, the
U.S. Postal Service and the Tennessee Bureau of Investigation.